When you sign a document, you are typically doing one or more of the following:
- Confirming the accuracy of the information in the document.
- Agreeing to the terms and conditions in the document.
- Claiming authorship of the document.
Your physical signature on a document (make sure you use the right ink) offers proof of your identity and confirms the document’s authenticity.
When it comes to electronic documents, a digital signature performs the same function as your physical signature, but with some extra security added.
How do digital signatures work?
The technology that powers digital signatures is fairly advanced. Basically, when you put a digital signature on an electronic document, the software generates a large number that’s based on the contents of the electronic document—this number is called a hash value. The hash value acts as a unique “fingerprint” of the document. The hash value then gets encrypted, and is embedded with your digital signature into the document itself.
When you send the digitally signed document to someone, it includes a key that lets the recipient’s computer decode the hash value and compare it to the document’s contents—in essence, matching up the original “fingerprint” to the document they received.
This action achieves two things: it authenticates your digital signature, and it confirms the document hasn’t been altered since you digitally signed it.
You can also digitally sign an electronic document sent to you from another source, as long as they have included the signing function in the document. In this way, you can digitally sign an electronic legal form or contract sent to you by a third party.
Want to know more? Here are three facts you should know about digital signatures.
1. There is a difference between electronic signatures and digital signatures.
Have you ever traced your signature on an electronic pad in order to pick up a parcel or collect a delivery from a courier? This is an example of an electronic signature (or e-signature).
Some digital documents allow users to sign them by tracing their signature on a touchscreen or tablet, usually with a stylus or their fingertip. However, an electronic signature does not have the same encryption features as a digital signature, making it a better choice for less important documents that don’t require enhanced security.
2. Digital signatures are legally recognized.
Digital signatures were made legally acceptable when the Electronic Signatures in Global and National Commerce Act (or E-Sign Act for short) was passed in 2000. In the European Union, the EU Directive for Electronic Signatures was passed in 1999. This means that, when properly used, digital signatures on legal documents are just as valid as handwritten signatures.
3. You need a digital certificate to create digital signatures.
In order to perform the encryption required for a digital signature, you need to have a digital certificate. Digital certificates are issued by a certificate authority (CA). A large organization may create its own CA, while smaller groups and individuals will typically purchase digital certificates from a CA business. Comodo, Symantec, and GoDaddy are the top digital certificate vendors worldwide.
There are also digital signature vendors that provide a number of customized solutions to their customers, usually on a subscription-based or a pay-by-transaction basis.
Secure your documents with digital signatures
If you are a small business owner or sole proprietor who would like to create documents with greater security in them, adopting digital signatures could be the solution. There are a number of different options available to bring the functionality of digital signatures into your organization.
